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Date: Tue, 21 May 2013 10:47:59 -0600
From: Quinn Harris <btcdev@quinnharris.me>
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Subject: Re: [Bitcoin-development] Double Spend Notification
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What if a transaction is tagged as eligible for replace by fee possibly 
using the lock_time (0xFFFFFFFE) so the parties involved can decide 
which approach works best for them.  If the receiving side doesn't see 
the type of transaction they want they consider it invalid.  The payment 
protocol can be used to negotiate which method should be used.

If lock_time is final as it is now for all standard transactions, the 
current behaviour for transaction propagation would be kept with the 
addition of double spend proof notifications as I described. But if the 
transactions are tagged appropriately, they would be replaced by fee.

In the recommended implementation, once a node sees a transaction that 
is not eligible to be replaced by fee it would treat all successive 
transactions that way despite the tag.

This shouldn't hurt merchants that wish to use just double spend 
notification while still enabling replace by fee for those who think it 
is preferred.

I do find the burn coins and buyer pays twice with a merchant refund to 
be compelling solutions, but you can't always trust the merchant (face 
to face street merchant).  Also, there is a short window of time were a 
block can be mined before the burn coin counter measure is received.  It 
is isn't guaranteed this will work better than current behaviour with 
double spend notification especially considering notification don't cost 
the merchant when it works.

- Quinn